Business Organizations Law Commons^™

Giant Asset Managers, The Big Three, And Index Investing, Dorothy S. Lund, Adriana Z. Robertson

Faculty Scholarship

A robust literature describes the incentives and stewardship practices of the “Big Three” asset managers (BlackRock, Vanguard, and State Street Global Advisors), often referring to these asset managers as “passive.” This is so common that the “Big Three,” “index fund,” and “passive manager” are used almost interchangeably by both academics and practitioners. This shorthand emerged in the foundational scholarship in this area, and while it may remain useful in certain contexts, its casual use obscures important features of the market and contributes to misperceptions. In this chapter, we demonstrate that it is a mistake to equate passive investing with index …

Reinventing Operational Risk Regulation For A World Of Climate Change, Cyberattacks, And Tech Glitches, Hilary J. Allen

Scholarly Articles in Law Reviews & Journals

Around 30 years ago, banking regulators began to construct the concept of “operational risk,” and devise rules to manage this newly created risk category. This “invention” of operational risk assembled a grab-bag of otherwise uncategorized risks associated with banking operations; this Article argues that the resulting operational risk regulation framework isn’t very well suited to some of those risks. In particular, this Article demonstrates that the existing operational risk regulation framework is becoming an increasingly inadequate response to banks’ exposure to operational losses following damage to their physical assets and business disruption and system failures. This is so for two …

Robots, Markets, And The Value Of Deal Lawyers, Heather Hughes

Scholarly Articles in Law Reviews & Journals

Emerging forms of automation using artificial intelligence (AI) and distributed ledgers are raising transformative questions for the practice of law. Deal lawyers are well-situated to understand the convergence of various modes of automation and their implications for their clients and the markets they facilitate. This Article contends that digesting threats and leveraging opportunities associated with new technologies calls for granular, context-specific assessment. It presents one instance of automation in one predominant market—the market for asset-backed securities (ABS)—by comparing securitization to a blockchain-based analog, tokenization. It considers how lawyers support the ABS market and how automation of lawyers’ functions could intersect …

Hearing On Next Generation Infrastructure: How Tokenization Of Real-World Assets Will Facilitate Efficient Markets, Hilary J. Allen

Legislative Testimony & Comments

Chairman Hill, Ranking Member Lynch, and Members of the Committee: Thank you for inviting me to testify at today’s hearing. My name is Hilary Allen, and I am a Professor of Law at the American University Washington College of Law. I am also a member of the CFTC’s Technology Advisory Committee, although I have prepared this testimony on my own behalf and not on behalf of either of these organizations. I teach courses in corporate law and financial regulation, and my research focuses on financial stability regulation and financial technologies. I have authored many articles for law reviews and the …

Tac Meeting Statements, Hilary J. Allen

Legislative Testimony & Comments

The Technology Advisory Committee will hold a meeting on January 8, 2024. At this meeting, the TAC will continue its discussion of issues relating to digital assets and blockchain technology, cybersecurity, and emerging and evolving technologies, here.

How A “Superstar” Ceo Exposes The Necessity For Third Party D&O Insurance, Angela N. Aneiros, Karen Woody

Scholarly Articles

he influence that “superstar” CEOs have over a company’s board of directors can be alarming. Among other things, Elon’s ability to skirt personal liability for seemingly obvious breaches of duty has raised concerns within the realm of corporate governance and corporate regulation. While much has been written on Elon’s influence on Tesla’s board of directors, one area of the law that often gets overlooked that has exacerbated Elon’s corporate governance issues, is that of directors and officers (D&O) liability insurance. While personally insuring board members seems like a very "Elon" move, it could have broader implications beyond Elon. Are “superstar” …

The Theories Of Corporate Pershonhood And Their Three False Choices: Developing A Framework For Corporate Rights, Katharine Jackson

Faculty Articles and Other Publications

Scholars often use the theories of corporate personhood—aggregation theory, concession theory, and real entity theory—to justify corporate rights through analogy. That is, theories of corporate personhood attempt to explain what rights corporations ought to have based on what kind of person the corporation is like. If corporations are like individual human beings, then corporations should enjoy all the same rights that human beings do. If corporations are like states, then corporations should owe the same obligations that a state owes its citizens. Of course, many scholars have addressed the weaknesses of this kind of analogical reasoning. As Dewey argued long …

A Catholic Defense Of Corporate Law And Practice, Julian Velasco

Journal Articles

In this essay, I provide a defense of corporate law and of pursuing a career therein from the perspective of Catholic teaching. I argue that Catholicism is not incompatible with the pursuit of wealth as such, but rather insists upon the appropriate use of wealth. I also argue that it is appropriate for corporate actors to pursue the interests of shareholders, provided that they do not break the law or otherwise sin in doing so. I also explain why I found transaction practice personally fulfilling.

Decentralized Autonomous Organizations And Regulatory Competition: A Race Without A Cause, Matt Blaszczyk

Fellow, Adjunct, Lecturer, and Research Scholar Works

Several states have enacted specialized limited liability company legislation in an attempt to attract decentralized autonomous organizations. In this way, the regulatory competition debate surrounding states such as Wyoming, Tennessee, and Vermont, attempting to dethrone Delaware, has found a new battleground. According to Professor Lynn LoPucki, this will entail a regulatory race to the bottom, that is, a race to “laxity.” I disagree. In fact, deregulation has already been achieved in the traditional limited liability company form. The decentralized autonomous organization limited liability company is no laxer or more attractive to investors, who will likely prefer the traditional limited liability …

Addressing Base Erosion: Impact Of The No Tax Breaks For Outsourcing Act On Tax Inversions And Profit Shifting, T. Scott Shogren

American University Business Law Review

The modern landscape of international taxation presents complex challenges arising from cross-border transactions and diverse tax regimes. This Comment delves into the intricate world of tax inversions, a process whereby U.S. firms shift their corporate headquarters abroad, thereby exploiting different tax jurisdictions. The implications of tax inversions are significant, and some scholars estimate there are substantial global tax revenue losses.

This Comment examines the mechanics of tax inversions, analyzing the tools employed by multinational corporations to reduce their tax liabilities, such as debt concentration and earnings stripping. This Comment also explores legislative responses, including the No Tax Breaks for Outsourcing …

The Structure Of Corporate Law Revolutions, William Savitt

Seattle University Law Review

Since, call it 1970, corporate law has operated under a dominant conception of governance that identifies profit-maximization for stockholder benefit as the purpose of the corporation. Milton Friedman’s essay The Social Responsibility of Business is to Increase Its Profits, published in September of that year, provides a handy, if admittedly imprecise, marker for the coronation of the shareholder-primacy paradigm. In the decades that followed, corporate law scholars pursued an ever-narrowing research agenda with the purpose and effect of confirming the shareholder-primacy paradigm. Corporate jurisprudence followed a similar path, slowly at first and later accelerating, to discover in the precedents and …

A History Of Corporate Law Federalism In The Twentieth Century, William W. Bratton

Seattle University Law Review

This Article describes the emergence of corporate law federalism across a long twentieth century. The period begins with New Jersey’s successful initiation of charter competition in 1888 and ends with the enactment of the Sarbanes-Oxley Act in 2002. The federalism in question describes the interrelation of state and federal regulation of corporate internal affairs. This Article takes a positive approach, pursuing no normative bottom line. It makes six observations: (1) the federalism describes a division of subject matter, with internal affairs regulated by the states and securities issuance and trading regulated by the federal government; (2) the federalism is an …

Public Primacy In Corporate Law, Dorothy S. Lund

Faculty Scholarship

This Article explores the malleability of agency theory by showing that it could be used to justify a “public primacy” standard for corporate law that would direct fiduciaries to promote the value of the corporation for the benefit of the public. Employing agency theory to describe the relationship between corporate management and the broader public sheds light on aspects of firm behavior, as well as the nature of state contracting with corporations. It also provides a lodestar for a possible future evolution of corporate law and governance: minimize the agency costs created by the divergence of interests between management and …

Corporate Law As Decolonization, Martin W. Sybblis

Faculty Articles

After centuries of colonial subordination, Black and Brown former colonies are still fighting to achieve the fruits of decolonization. The traditional theory is that former colonies will emerge from the colonial period with the legal mandate and international recognition needed to chart their own futures. But, for those Black and Brown British colonies that achieved political independence, it became clear that, without economic strength to care for their societies, legal separation could not deliver on its promise of freedom from subordination. This Article argues that investments in corporate law innovations by some jurisdictions, such as Bermuda, the British Virgin Islands, …

Beyond Profit Motives, William J. Moon

Faculty Scholarship

Why do corporations exist? Generations of legal scholars have debated both the origins of business corporations and their purpose.1 Professor Stephen Bainbridge’s new book The Profit Motive: Defending Shareholder Value Maximization is a substantial contribution to this literature and an essential read for anyone who wishes to better understand a controversy that has an immense impact on how movers and shakers of today’s largest corporations make decisions.

Corporate Purpose And The Road, William P. Murray, J. Haskell Murray

Transactions: The Tennessee Journal of Business Law

No abstract provided.

Coster V. Uip Companies, Inc.: Corporate - Delaware Board Elections, William Gass

Transactions: The Tennessee Journal of Business Law

No abstract provided.

Institutional Investors As Climate Activists: Curb Your Enthusiasm, Markus Lieberknecht

American University Business Law Review

Institutional investors control a sizable portion of all votes in major public corporations. In contrast to their traditional deference to management, some institutional investors have begun to lobby portfolio companies for reductions in greenhouse gas (“GHG”) emissions because even broadly diversified portfolios are vulnerable to the systemic risks associated with climate change. In theory, this logic could align the interests of diversified investors and those of society at large, resulting in welfare-enhancing climate activism. However, because of the chasm between the portfolio-level goal of GHG reduction and the company-level goal of value maximization, climate activism by institutional investors is bound …

U.S. Securities And Exchange Commission And The "Deep Administrative State": A Case Study Of Its Esg Rules, Jerry W. Markham

American University Business Law Review

This study examines the highly controversial “environmental, social, and governance” (ESG) rules that were adopted by the Securities and Exchange Commission (SEC) in 2024. Those rules require large public companies to disclose their policies for dealing with climate change and report their greenhouse gas emissions. Critics charge that those rules are the product of a “deep state” administrative agency that is operating outside the checks and balances imposed by the Constitution on other government actors. The study relates the background for these deep state concerns and the constitutional and statutory restraints that were intended to prevent the development of such …

Growing Tensions: Consumer Privacy And Corporate Disclosures, Megan Wischmeier Shaner

Faculty Articles

Data privacy and data security have become key issues for legislators, regulators, and individual citizens. Roughly two-thirds of Americans believe their data is being regularly tracked, monitored, and collected by companies and the government. A majority of U.S. adults also believe their data is less secure today than five years ago, expressing concerns that they have little control over how their personal information is being used and that the entities who control their data are not responsible stewards. In the absence of comprehensive federal regulation, a continuous stream of privacy statutes have been proposed at the state level. Beginning with …

Divide, "Two-Step," And Conquer: How Johnson & Johnson Spurred The Bankruptcy System, Patrick Maney

University of Cincinnati Law Review

No abstract provided.

Determining An Effective Regulatory Framework For Businesses To Report On The Environment, Climate, And Human Rights, Paco Mengual

Pace International Law Review

The objective of this article is to identify the existing dynamics and clarify the reasoning behind reporting on environmental, climate, and human rights information in search of effective and binding frameworks to enhance transparency. To that effect, this article relates the evolution from a corporate sustainable business focus to reporting on environmental social and governance and increasing corporate accountability. It then expands on defining non- financial information and ESG reporting with regards to recent European Union Regulations (SFDR, Taxonomy) as well as the challenges associated with defining sustainable investments. This article aims to compare and understand the various regulatory strategies …

Corporate Law’S Threat To Human Rights: Why Human Rights Due Diligence Might Not Be Enough, Barnali Choudhury

Articles & Book Chapters

The take-up of mandatory human rights due diligence (HRDD) initiatives by states is continuously gaining momentum. There are now numerous states adopting some form of HRDD laws. While corporations being duly diligent in respecting human rights is a positive step towards addressing problems of business and human rights, these HRDD initiatives on their own may only be a form of window-dressing, that is, enabling states to put a smart spin on their efforts to address business and human rights issues without addressing some of the root causes of that predicament. As a result, HRDD laws are likely to be a …

A Theory Of Substantive Standards Of Review: The Case Of Corporate Law, Tomer S. Stein

Scholarly Works

In Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, the Supreme Court limited deference to universities. In West Virginia v. EPA, the Court reduced its deference to administrative agencies. In Coster v. UIP Cos., Inc., the Delaware Supreme Court limited deference to boards of directors, proclaimed a new standard of review, and then retracted the new standard of review (maybe). Common to these constitutional, administrative, and corporate law cases is unpredictability, uncertainty, and inconsistency in the use and application of substantive standards of review. This doctrinal chaos is explicitly acknowledged by the very judges that formulate …

Initiation Payments, Scott Hirst

Faculty Scholarship

Many of the central discussions in corporate governance, including those regarding proxy contests, shareholder proposals, and other activism or stewardship, can be understood as a single question: Is there under-initiation of corporate changes that investors would collectively prefer?

This Article sheds light on this question in three ways. First, the Article proposes a theory of investor initiation, which explains the hypothesis that there is under-initiation of collectively-preferred corporate change by investors. Even though investors collectively prefer that certain corporate changes take place, the costs to any individual investor from initiating such changes through high-cost proxy contests, or even low-cost shareholder …

Toward An Enhanced Level Of Corporate Governance: Tech Committees As A Game Changer For The Board Of Directors, Maria Lillà Montagnani, Maria Lucia Passador

The Journal of Business, Entrepreneurship & the Law

Although tech committees are increasingly being included in the functioning of the board of directors, a gap exists in the current literature on board committees, as it tends to focus on traditional board committees, such as nominating, auditing or remuneration ones. Therefore, this article performs an empirical analysis of tech committees adopted by North American and European listed companies in 2019 in terms of their composition, characteristics and functions. The aim of the study is to understand what “technology” really stands for in the “tech committees” label within the board, or – to phrase it differently – to ascertain what …

Is Corporate Law Nonpartisan?, Ofer Eldar, Gabriel Rauterberg

Faculty Scholarship

Only rarely does the United States Supreme Court hear a case with fundamental implications for corporate law. In Carney v. Adams, however, the Supreme Court had the opportunity to address whether the State of Delaware’s requirement of partisan balance for its judiciary violates the First Amendment. Although the Court disposed of the case on other grounds, Justice Sotomayor acknowledged that the issue “will likely be raised again.” The stakes are high because most large businesses are incorporated in Delaware and thus are governed by its corporate law. Former Delaware governors and chief justices lined up to defend the state’s …

A Vision Of The Anti-Racist Public Corporation, Steven A. Ramirez

University of Cincinnati Law Review

No abstract provided.

International Law In The Boardroom, Kishanthi Parella

Scholarly Articles

Conventional wisdom expects that international law will proceed through a “state pathway” before regulating corporations: it binds national governments that then bind corporations. But recent corporate practices confound this story. American corporations complied with international laws even when the state pathway broke down. This unexpected compliance leads to three questions: How did corporations comply? Why did they do so? Who enforced international law? These questions are important for two reasons. First, many international laws depend on corporate cooperation in order to succeed. Second, the state pathway is not robust, then or now. It is therefore vital to identify alternatives to …

Voting Rights In Corporate Governance: History And Political Economy, Sarah C. Haan

Scholarly Articles

Political voting rights have become the subject of sharp legal wrangling in American political elections and the focus of headlines and popular debate. Less attention has focused on American corporate elections, where something similar has been happening: the last two decades have witnessed significant unsettling of basic shareholder voting rights, including laws and practices that were mostly stable throughout the twentieth century. Today, shareholder voting rights are in flux and, increasingly, in controversy. This Article connects the current moment of instability to the last significant era of change in shareholder voting rights—the nineteenth century—and brings historical context to a new …